Why Ontario has a strong economic case for seceding from Canada

If it were simply a question of dollars and cents, Ontario should separate from Canada, now.

This is emphatically not the conclusion of a new report by the Ontario Chamber of Commerce on the punishment that Ottawa inflicts on Canada’s economic heartland. But so damning is the evidence contained in that report that the sentiment is hard to suppress.

A copy of “A Federal Agenda for Ontario”, released Thursday, was provided in advance to The Globe and Mail.

It details the manifold ways in which federal policies punish Ontario workers and the Ontario economy.

‘Twas ever thus, but at least in the past Ontario was wealthy enough to bear the burden. No more.

“Ontario needs to think of how it can reinvent itself and reinvent its economy,” Allan O’Dette, president of the Ontario Chamber of Commerce, said in an interview.

The province, he maintains, cannot retool its manufacturing industries, retrain its work force and renew its infrastructure while spending billions each year to prop up other regions of the country.

“We need to think of a more modern and appropriate approach” to the federal-provincial fiscal arrangement, he maintained.

Consider a few of the ways in which the federal government robs the goose that is no longer golden (the data is taken from the OCC report):

Even though the unemployment rate in Ontario is almost a full percentage point above the national average, and has been for years, EI rules make it harder for Ontario workers to qualify for benefits than workers in any other province. Every year, Ontario workers contribute $1.2-billion more to EI than they receive in benefits.

Although Ontario hosts 42 per cent of all the unemployed workers in Canada, it receives only 28 per cent of federal labour market development funds.

Ontario has the largest aboriginal population of any province. Inadequate federal funding (an annual shortfall of $100-million, in Ontario’s case) contributes to substandard on-reserve elementary schools. “The underfunding of on-reserve elementary schools often means that students arrive at the secondary level with acute remedial needs,” the report observes.

Despite high unemployment, Ontario suffers from an acute shortage of skilled labour. Immigration could fill the gap, but Ontario’s share of economic-class immigrant intake has plummeted over the last decade from 90,000 annually to 37,000. Yet Ontario is permitted only 5 per cent of the skilled workers each province may recruit under the Provincial Nominee Program.

Federal infrastructure funding discriminates against Ontario. Ottawa’s Building Canada Plan underfunds Ontario by $970-million, which is what the province would receive on a per-capita basis.

Because of high unemployment and slow growth, Ontario now receives federal equalization funding. However Ontario taxpayers contribute $2.7-billion more each year to the equalization program than the province gets back.

Citing the Drummond Report, the Chamber concludes that Ontario contributes $12.3-billion more to the federal government than it receives in transfers, even though 600,000 Ontarians are out of work, little economic growth is expected over the foreseeable future, and the provincial debt is approaching $300-billion.

Of course, the ledger isn’t entirely one-sided. Ottawa and Ontario both contributed massive sums to rescuing the province’s auto sector during the recession. The two governments co-operated in creating a harmonized sales tax, and both are trying, thus far without success, to convince the rest of the country of the need for a national securities regulator.

But as a cold hard calculation, Ontario has a much better economic case for seceding from Canada than Quebec ever will.

Of course that will never happen. Nor does the Chamber recommend any such thing. Instead, the report calls for “federal public policies that reflect the new reality of the Canadian economy.”

As Mr. O’Dette puts it: “It is absolutely in the collective best interest of Canada for Ontario to prosper.”

But prosperity will prove elusive, unless $12-billion that flows out of Ontario annually is used at home – to retrain unemployed workers, to expand public transit in Greater Toronto and to supply the needed roads, energy and Internet without which Northern Ontario’s Ring of Fire, touted as the most promising Canadian mining development in a century, will never reach its full potential.

The federal and provincial finance ministers are meeting on Sunday. Federal Finance Minister Jim Flaherty used to be Ontario’s finance minister. He knows these numbers. Now, thanks to the Ontario Chamber of Commerce, voters in his Ontario riding of Whitby-Oshawa can know them too.